HP Inc. (HPQ.US) bets on AI computers as a "demand accelerator" for the PC market, expecting explosive growth between 2025 and 2026.

HP Inc. (HPQ.US) believes that artificial intelligence (AI) personal computers will be a key factor driving demand growth in the personal computer market. The company plans to integrate AI technology into its product line to adapt to hybrid work environments and significantly improve employee efficiency. In addition, HP Inc. CEO Enrique Lores predicts that the promotion of AI personal computers will gain momentum in 2025 and 2026. Lores spoke at the Goldman Sachs Group, Inc. Communacopia+ Technology Conference to discuss the company's recent earnings, the prospects for AI, and future growth drivers. Regarding HP Inc.'s recently announced third-quarter earnings, Lores pointed out that despite the non-GAAP earnings per share falling short of expectations, the company has resumed growth for the first time in several quarters. Lores predicts that the growth of the personal computer market in 2025 will surpass that of 2024, based on three main factors. Firstly, the large number of PCs purchased during the COVID-19 pandemic have now aged and need to be replaced. Secondly, with Microsoft Corporation announcing the end of support for older versions of Windows, the update to Windows 11 will bring new opportunities. Thirdly, the launch of AI personal computers will accelerate in 2025 and 2026, which HP Inc. expects to be a catalyst for driving market demand. "We expect the personal computer market to see slight growth in 2024 and further growth in 2025," added Lores. From a regional perspective, the market in India has seen significant growth, and HP Inc. sees India as a key market for future growth. Furthermore, HP Inc.'s business is divided with around 75% in the commercial segment and 25% in the consumer segment. Lores emphasized that the commercial PC business is more important in terms of sales and pricing, as it has higher prices and profit margins. In contrast, while consumer spending on hardware is overall weak, Lores believes that upgrades are inevitable over time. Additionally, the application of AI technology will also impact the consumer market and drive demand growth. When discussing the prospects for AI personal computers, Lores expects that in three years, AI personal computers will account for approximately 50% of the market shipment volume and could drive up the average selling price (ASP) of the entire PC category by 5% to 10%. He predicts that the impact in 2024 will be minimal, while the impact in 2025 and 2026 will be more significant. Currently, HP Inc. has begun collaborating with Qualcomm (QCOM.US) and AMD (AMD.US) to launch a new generation of AI PCs, which have already started shipping. Lores also mentioned the company's investments in peripherals such as headphones, speakers, and cameras in the business and gaming sectors, where consumers are willing to spend a significant amount of money. Lores commented, "These are areas that we have been less involved in before, but now we have the appropriate product portfolio, which will help to drive our growth." He added that gamers spend three times more on peripherals than on PCs, and HP Inc. has a strong gaming peripheral product portfolio through the HyperX brand, which presents opportunities for profit growth for the company.